Homebuyer mortgage approvals down

Mortgages: Approvals down

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Monday, 29, Oct 2007 11:14

Mortgage approvals for home purchases fell in September to the lowest level since July 2005, according to new Bank of England data.

However, consumer credit was at its highest level since January 2006.

In total there were 102,000 mortgages approved for house purchase - down 6,000 on last month and 12,000 on two months ago.

Meanwhile approvals for remortgages were up on last month to 101,000 - but still below the sixth month average.

The fall in the approvals for home buyers is further evidence the UK housing market is slowing after Hometrack reported falling property prices in October.

"Evidence is now coming pretty thick and fast that housing market activity is being squeezed by a combination of tightening lending standards resulting from the credit crunch and the increasing affordability pressure on house buyers coming from higher interest rates, elevated house prices and modest real disposable income growth," said Howard Archer, chief UK economist at Global Insight.

Although the housing market is slowing, September saw increases in consumer borrowing of £1.4 billion - following a steady upward path for credit cards borrowing (up £1 billion), and stable overdraft and personal loans lending (up £0.3 billion).

This could be put down to Britons either feeling comfortable with the state of the economy and ready to borrow or people finding it necessary to borrow to help ends meet.

Net lending to individuals rose to £11.2 billion and Brits now owe in total £1,379.6 billion.

"This provides further evidence that the housing market is cooling in response to five interest rate increases and the more recent squeeze on credit," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).

"Although today's figure represents a fall in activity of 11 per cent since July, mortgage approvals are still above the long run average thanks to the combination of a resilient economy and generally healthy employment climate. That said, we expect further weakness in activity in the coming months."